Real Property Appraisals: A PrimerPurchasing a home is the most important transaction many people may ever encounter. It doesn't matter if it's a primary residence, a second vacation home or an investment, purchasing real property is a detailed financial transaction that requires multiple parties to make it all happen.
The majority of the participants are very familiar. The most known entity in the transaction is the real estate agent. Then, the lender provides the financial capital necessary to bankroll the transaction. Ensuring all requirements of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.
So who makes sure the real estate is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Alabama licensed appraiser from ALSouth Appraisal Services LLC will ensure you as an interested party are informed.
Inspecting the subject propertyTo ascertain the true status of the property, it's our duty to first complete a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.
Once the site has been inspected, an appraiser employs two or three approaches when determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Replacement CostHere, the appraiser uses information on local construction costs, labor rates and other elements to derive how much it would cost to build a property comparable to the one being appraised. This estimate commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable SalesAppraisers become very familiar with the subdivisions in which they appraise. We thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use a third approach to value. In this scenario, the amount of revenue the real estate generates is factored in with income produced by nearby properties to give an indicator of the current value.
Putting It All TogetherCombining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. It is important to note that while this amount is probably the best indication of what a property would sell for in an open market, it probably will not be the final sales price. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. The bottom line is: An appraiser from ALSouth Appraisal Services LLC will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.
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